Oregon Saving Programs

State-Run IRA

The lack of retirement savings among Americans is almost universally bemoaned but nudging, prodding, and lecturing have done little to build up nest eggs for old age. So some states say they are going to make it easier to save with a simple plan: an automatic payroll deduction for retirement savings.

Oregon is the first state to roll out a plan that covers private sector workers who do not otherwise have access to a savings/retirement plan in their workplace. The deduction is an automatic five (5) percent of gross pay unless the worker opts out. Participants can reduce the percentage if they choose. The state directs the money gathered under the OregonSaves plan to privately run low-cost investment funds.

Oregon completed a test of its OregonSaves program in2017 and began expanding it statewide in January. As of mid-April, 2018, more than 600 employers had registered for the program, and more than 31,000 employees — more than three-quarters of those eligible — were enrolled, with about 10,000 making contributions, Oregon officials said.

Those enrolled in the new state-sponsored accounts could, instead, use that money to temporarily cover their expenses after they retire, allowing them to delay claiming their Social Security benefits for a year or more according to a report from the Pew Charitable Trusts.

Since many people lack adequate retirement savings or traditional fixed pensions, the idea of delaying Social Security payments to receive bigger checks is “getting traction.”

Some workers may be unable to delay claiming benefits past age 62 if they are in poor health or unemployed. But others simply may be reluctant to postpone the benefits because they lack savings. State-based individual retirement accounts that automatically enroll workers who don’t have retirement benefits through their employers can help meet that need, Pew’s report said.

Workers can delay claiming their federal benefits, and instead withdraw an amount equal to what their monthly benefit would be from their so-called auto-I.R.A.For example, if a worker retiring at 62 would get $700 a month in benefits, but had $8,400 in a state-based auto-I.R.A., the worker could wait a year to claim the benefit and instead withdraw $700 a month from the retirement account. The monthly benefit a year later, when the worker was 63, would climb to about $750.

The approach can especially benefit younger, minority and lower-income workers, who are less likely to have job-based retirement plans, Pew said.

Under a simulation run by the Social Security Administration at Pew’s request, Pew found that if workers contributed 3 percent of their income to a state-run auto-I.R.A. for 31 years, starting in 2019, nearly 40 percent of them could delay Social Security by a year or more. (The model accounted for workers entering and leaving the program, and for older workers who would contribute for fewer years.)

Oregon College Saving Program

In January of 2001 Oregonians may begin to invest in the Oregon College Savings Plan. This state-sponsored plan meets the federal qualifications for special tax status as a Qualified Tuition Savings Program (QTSP).

Oregon residents can deduct up to $2,310 for a single taxpayer and $4,620 for couples filing jointly. Contributions made until April 15th qualify for a deduction for the previous year.

Also, you can carry forward a contribution greater than $2,300 ($4,600 for couples) for the next four years (2015-2018). So, a couple can contribute $23,000 now, claim a $4,600 subtraction on their 2015 return, and then claim subtractions for $4,620 in 2016 and then claim similar subtraction amounts in 2017, 2018 and 2019. See page 72 of the Oregon Individual Income Tax Guide (also known as Publication 17-and-a-half) for another example.

Oregon state law allows someone — even out of state — to contribute to an account you own while you claim the subtraction from taxable income. But both of you can’t claim a subtraction for the same contribution.

From the Oregon College Saving website, “The tax plan signed into law on December 22, 2017, by President Trump includes provisions related to 529 college savings plans. Effective January 1, 2018, qualified withdrawals for federal tax purposes have been expanded to include up to $10,000 in tuition per student in connection with enrollment or attendance at public, private, or religious elementary or secondary schools. Only the federal tax treatment for qualified distributions was changed by the federal tax plan. At this time, states are reviewing the impact of the federal tax change to determine whether they require changes to state legislation. Additional updates pertaining to the state tax treatment for K-12 withdrawals are forthcoming. We recommend you consult a qualified tax advisor about your own personal situation.”